Tips Build A Better Investment Portfolio From P2P lending

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Tips Build A Better Investment Portfolio From P2P
lending
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If you are a lender on P2P lending platform, you
can easily build a better investment portfolio by
diversifying, automating your investment and
staying invested for a longer term. Peer to
peer lending in India is relatively a new asset
class, but investors are already exploring it to
include it in their investment kitty. If you have
decided to become one of the personal loan
lenders on a P2P lending platform, you would be
also looking at building an optimal portfolio to
get the maximum risk-return trade-off.
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1. Diversify The mantra of dont put all eggs in
one basket applies to lending money online as
well. The investment amount Unless you have a
specific reason to offer loan to a single
borrower or have a small investment size (for
example, Rs10,000), you should spread the loan
amount over a number of borrowers. Across the
borrower profile You will find borrowers from
different personal, financial and professional
backgrounds on peer to peer lending sites in
India. Across risk categories Each borrower
gets a credit rating from the peer to peer
lending companies in India. While, most personal
loan lenders would prefer low risk borrower, it
wouldnt be a riskier proposition to lend money
to one or two borrowers with medium or high risk
rating. So, depending on your risk-return
expectation, you can diversify across risk
categories.
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2. Automate Your Investment Several P2P lending
platforms such as LenDenClub offer automated
investment service. If you are an individual or
an institutional investor with large investment
amount to disburse, then you can use automated
investment. Instead of manually looking over each
loan or borrower profile, you can save time by
applying automated filters and get a quick
overview. It also makes easier to manage the
account with so many borrowers and huge
investment to take care of.
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3. Stay Invested Most personal loan lenders make
the mistake of withdrawing the interest return or
principal repayment EMIs at regular intervals,
even monthly or quarterly in some cases. However,
it is advisable to stay invested for a longer
period and re-invest the cash flow. This will
fetch you more money through the power of
compounding.
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